Former bar owner says resolving tax problem with IDOR has been "a nightmare"

Jonathan Bilyk Feb. 23, 2015, 9:15am

Nick Pezzuto sold his last beer in 2009.

Now, Pezzuto, the director of a Chicago Heights Magnet school, is counting down the days to when he can write a fat check to the state of Illinois and rid himself of the last of the sales tax liability the Illinois Department of Revenue believes he yet holds from the sale of the beers and other alcoholic drinks he and his partners sold through a Steger sports bar in the years preceding his career change.

The problem?

As the calendar turned to 2015, Pezzuto still had no idea when that opportunity would actually arrive – or how big the check would need to be, as his case languished in the Department of Revenue’s shorthanded tax review process.

“I feel like I’m fighting with the state,” Pezzuto said. “But I’m actually fighting with them to just take my money, so I can get on with my life.”

Pezzuto’s entanglement with IDOR began in the days just before Christmas 2011, when he received a letter few actually expect to receive – a notice from the state’s tax collection body he owed unpaid sales taxes, plus penalties and interest, totaling more than $72,000.

“Merry Christmas to me, you know?” Pezzuto said.

For about a decade, Pezzuto had been a partner in Cervino Inc., a company formed in 1999 to operate the Joltin’ Joe’s sports bar in Steger, on the Cook-Will County line.

In 2009, Pezzuto sold his stake in the business to his partners, and left to pursue a new career in education. Most recently, he has served as the director of the STEM Magnet Academy for Chicago Heights School District 170.

Much of the last three years of his life, however, have been consumed by his ongoing tax collection case before the IDOR.

After auditing Cervino Inc. in 2009, Pezzuto said IDOR told him it had initiated a collection action against the business in 2011 for what the agency deemed to be underpayment of sales taxes in 2006 to 2008, the years covered by the audit. As the case has unfolded, Pezzuto said he has learned IDOR used a “sampling” technique to determine the business’ actual sales tax liability – essentially using a multiplier to determine how much more in sales tax the agency believes the business should have paid above the taxes the business owners actually paid.

However, throughout the audit process, Pezzuto said he was unaware of the action, as he said he had not spoken to his former partners since they bought him out.

After Joltin’ Joe’s closed in 2011, IDOR turned its attention to Pezzuto, who was listed as a partner on the company’s documentation for the audited years.

Pezzuto said he does not know exactly what happened to his former partners, nor does he know if IDOR is pursuing them for the unpaid taxes, as well.

But Pezzuto said what has happened to him since has been “a nightmare.”

“I feel like I’ve been held hostage for the last three and a half years,” he said.

Since he was not aware of the collection action until December 2011, Pezzuto said IDOR and his lawyer, Tami Tolitano, a managing partner with Lohman, Neschis & Tolitano LLC in Des Plaines, informed him he had missed his 60-day window to appeal.

IDOR is required by law to notify only the business at its last known address.

If he had known about the action, Pezzuto said he would have appealed, and attempted to challenge the audit results.

“But now I guess I’m saddled with everything,” he said.

After IDOR followed through on its threat and slapped liens on Pezzuto’s property, Tolitano helped Pezzuto obtain a restraining order to prevent the state from claiming any of his property until the hearing process played out.

More than three years later, Pezzuto said he is still waiting for the process to conclude.

Since 2012, he said he has made several offers in compromise to satisfy the debt. One was rejected and another was “lost” when the revenue agent assigned to his case said he had mishandled paperwork, prompting Pezzuto to move to the back of the line and resubmit.

Now, Pezzuto said, he is waiting to hear whether IDOR will accept his latest offer. A hearing is scheduled for March 3 in Chicago.

With more than $85,000 now demanded by the state, thanks to swelling interest, Pezzuto said he is hoping the state will accept half the debt from him, in recognition of his status as just one of the partners in the business.

“My life’s at a standstill,” Pezzuto said.

Terry Horstman, an IDOR spokesman, declined to comment on Pezzuto’s case, specifically, citing “confidentiality.” He also declined to say whether IDOR was pursuing similar actions against any of Pezzuto’s former business partners.

However, Horstman said Pezzuto’s case is just one of thousands of such collections actions before the department’s Board of Appeals, a panel of three hearing officers charged with reviewing audit collections actions at the request of the audited taxpayers. While the board is not authorized to reexamine the findings of the auditors, it is empowered to accept offers in compromise from audited taxpayers to settle the tax debt for less than what is owed, or to evaluate whether penalties and interest on the tax debt can be reduced.

Horstman said IDOR could not provide statistics on how many sales tax audits ultimately head to collections. But over the last four years, the board has received an average of 2,900 petitions annually from audited taxpayers, and have closed about 2,400 such cases each year.

On average, he said, a case takes about six months to two years to close.

Further, Horstman said of the thousands of sales tax audits conducted by IDOR each year, “we use sampling techniques to establish the liability assessed in virtually every sales tax audit we perform.”

Pezzuto said he understands his chance to dispute the validity of the tax debt has passed.

And he said his lawyer and others have explained to him the pitfalls of a process backlogged with a great number of cases, likely similar to his.

“There are, what, tens of thousands waiting in line to pay the state?” Pezzuto said. “I get that. But I just want to pay my fair share, and start over.” 

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